Estimation

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We estimate things. What is our market share? How satisfied are our customers? What impact will a 10% price cut have on sales? Second, we explain things. Why do people buy iPhones? What makes customers satisfied? Why did our last product launch bomb? Why is it that sales increase by 30% when price is cut by 10%? What can we do to rejuvenate our brand?

Lots of market research studies are focused entirely on estimation (although this technical term is not commonly used by practitioners). Market sizing studies work out how many people are in a market. Usage and attitude studies (U&As) measure what people think and do. Governments around the world conduct census studies, estimating the number of people in their countries.

When people think about market research they often think about questionnaires, asking people things like:

Thinking about your last flight on Qantas, were you...
[] Very satisfied
[] Somewhat satisfied
[] Neither satisfied nor dissatisfied
[] Somewhat dissatisfied
[] Very dissatisfied

However, there are lots of other ways of estimating facts about markets. Peoplemeters sit on top of TVs and count who is watching what at any given time. Point-of-sale scanners in the supermarket measure what has been purchased. Toy manufacturers give children rooms full of new toys and observe which ones are played with. Some researchers even sort through garbage to find out what people really eat and buy. In focus groups and in-depth interviews, qualitative researchers discuss topics with people and form conclusions about what people think; these conclusions are also estimates (although do not expect a qualitative researcher to use this term).

Estimates can relate to history, such as how many people purchased a product last month. Estimates can be predictions, such as the revenue impact of a price increase or the degree of cannibalization that will result when a new product launches. And, we can even have estimates of things that did not happen, but could have happened, such as the amount of sales that we would have had last year if we had spent an extra million dollars on advertising. Predictions can be quantitative forecasts, such as forecasting that a new ice cream will be purchased by 8% of the market. Predictions can also be more general conclusions about cause and effect, such as concluding that a change in the pack design of a product will result in an increase in sales.

Estimates are often derided, with good reason, as being mere facts and figures. The real need is often for understanding. Is Microsoft the dominant software brand in the world because it is excellent, because it has blocked its competitors or for some other reason? Why do people buy Coke? What does a new bank have to do in order to encourage customers to switch to it? What can a government do to make people more willing to pay their tax?

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